• by Aaron Baar , July 7, 2011

With gas prices dropping, U.S. consumers found a reason to return to the stores, as the retail sector showed significant gains in June, boosting the outlook for the back-to-school season, which begins in late July.

Columbus, Ohio-based retail consultancy Kantar Retail reported its same store sales index (which includes 28 stores, most of them apparel retailers) rose 7.1% in June, a jump from May's increase of 5.7% and much higher than the 3.2% gain reported in June 2010. The company attributed the gains in part to a drop in gasoline prices, which topped $4 a gallon in mid-May, and declined to an average of $3.58 a gallon by July 4.

The drop of gas prices may also factor into purchase intentions, another metric Kantar tracks, which appear to be leveling off. According to Kantar, shoppers who say they intend to spend "about the same" or "somewhat/much more" have held steady from May to June. Going into the back-to-school season, 77% of shoppers said they plan to spend the same or more than they did last year on back-to-school purchases, compared with 70% who said the same a year ago.

At the same time, the International Council of Shopping Centers reported chain-store sales were up 5.5% compared with June 2010. (The total excludes fuel sales. With fuel sales included, chain-store sales rose 6.9%). Those gains were stronger than expected, and were pushed by stronger employment growth, better weather and summer clearance sales, according to Michael P. Niemira, chief economist and director of research for the ICSC. The group predicted July gains would be in the 3.5-4.5% range, excluding fuel sales.

"High fuel and food prices will still take a toll, but a sustained letup in gasoline prices will help ensure that the toll means slower growth instead of outright declines in discretionary spending in the months ahead," said Frank Badillo, Kantar Senior Economist, in a statement.